In early trade on Thursday, the Indian rupee fell to an all-time low against the U.S. dollar, tracking Asian peers with weakening macroeconomic fundamentals on the domestic front also weighing on the currency. At the interbank foreign exchange market, the rupee opened at 68.87 a dollar against 68.61 previously and sank to 69.10 in morning deals, failing 49 paise.
Forex dealers said that consistent dollar demand from banks and importers, mainly oil refiners, following higher crude oil prices kept the rupee under pressure. Global oil prices have claimed after the US asked its allies to end all imports of Iranian oil by November. Concerns over supply disruptions in Libya and Canada also pushed prices higher. Higher crude oil prices and a declining rupee are a double whammy for India.
RBI officials say, the Reserve Bank of India’s (RBI) battle to contain a falling rupee just got tougher. The current account deficit is widening and a weak global investment climate coupled with policy paralysis in New Delhi, sticky inflation and slowing growth have increased the aversion of foreign investors to India, pushing the capital account into the red. Last week’s move by rating agency Standard & Poor’s to cut the country’s credit rating outlook to “negative” has complicated matters further for the RBI, which has few options other than intervention and tinkering with rules on export credit to encourage inflows.